Medicare Says 'No' to Two-Midnight Rule

August 9, 2016

Medicare has dropped its two-midnight rule and will refund payment reductions made during the past three years under the rule. The Centers for Medicare & Medicaid Services (CMS) included the decision in its final regulation on rates and policies for Medicare inpatient hospital services for Fiscal Year 2017.

The agency had reduced rates in previous years to offset increased revenue it said hospitals would receive as they shifted outpatient care to inpatient care under the two-midnight policy. By refunding these reductions, CMS will increase FY 2017 payments about 0.8%

The final inpatient rule for FY 2017, which begins October 1, 2016, also includes these highlights:

Rates: Hospitals that successfully report the quality of their performance to CMS and are meaningful users of electronic health records (EHR) will receive a payment update of about 0.95%. This includes the 0.8% increase resulting from the Medicare decision on the two-midnight rule.

Reductions: Hospitals that do not successfully participate in quality reporting will face a one-fourth reduction in their market basket rate increase. Hospitals that are not meaningful EHR users will be subject to a three-fourths reduction in the market basket.

Hospital Acquired Conditions: Hospitals in the worst performing 25% of hospitals in reducing hospital acquired conditions will continue to experience a payment penalty of 1%. In FY 2017 rule, CMS is adding a new composite patient safety measure which incorporates pressure ulcer rates and post-operative hip fractures, among others.

Readmissions: Beginning in FY 2017, CMS will add coronary artery bypass graft to the list of conditions it will use in evaluating excessive readmission rates. It said it will also improve the speed of publicly posting a hospital’s readmission performance.

Value-Based Purchasing: CMS will add two new condition-specific payment measures—acute myocardial infarction and heart failure—starting in FY 2021. It also will add a 30-day mortality measure for coronary bypass surgery starting in FY 2022.

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